Smallest businesses in England could see water bills rise by up to 18%

Some of England’s smallest businesses could see their annual water bills rise by as much as 18 percent from next year under new proposals from the industry regulator.

OffWat has launched a consultation on a plan to move from multiple regional price ranges to a single England-wide cap, which would increase water and wastewater bills by an average of 0.1 per cent for smaller firms.

The regulator stressed that the impact of the proposed changes will vary significantly from business to business.

Those with the highest limit could be in line for a deduction of up to 13 per cent, while those with the lowest limit could be in line for an increase of up to 18 per cent.

To help manage the impact on both retailers and business customers, OffWatt proposes to limit the annual fluctuation in bills before inflation – up or down – to around 5 percent.

The review of the water price cap comes at a time when small businesses are grappling with rising energy bills and extreme inflation, with many fearing sky-high energy bills could force them to close.

Businesses are not protected by energy price limits.

However, some smaller firms are covered by a ‘retail exit code’ price cap, which limits the maximum prices they can be charged for water if they fail to make the switch. Default tariff – or ‘deemed contracts’.

These caps were introduced in England in April 2017 when the water market was deregulated and 1.2 million businesses were allowed to choose their own supplier, while previously having to buy from their local supplier.

But there are currently over 50 different price ranges for small businesses in England and OffWatt wants to rationalize this to a range across England.

The price cap only applies to small businesses with an annual consumption of less than 50 megalitres (ml) or 50 million liters and the proposed changes will apply to this group only.

This is because OffWatt found evidence that smaller companies weren’t buying enough for better deals, putting them at risk of overcharging.

Its survey in January found that only 3.4 percent of SMEs and 4 percent of micro-businesses switched suppliers in the past year, compared to about 10 percent of larger firms.

Georgina Mills, Business Retail Market Director, OffWatt, said: ‘This is the first time we have done a complete review of retail costs to serve small business customers.

‘Competition is working less well for small business customers, so our offerings aim to protect these customers while supporting a sustainable market where skilled retailers can earn reasonable returns.’

Large firms consuming more than 0.5Ml of water per year are not affected by the latest proposed changes, as OffWat said they have shown a greater likelihood of switching to get the best deals.

However, these firms will face a 0.5 per cent increase in their price range over the next two years under the new rules announced in February.

The regulator said the purpose of these ‘temporary increases’ is to allow water firms to share some of the bad debt-related costs they have incurred as a result of the pandemic.

Federation of Small Business (FSB) policy chair Tina McKenzie said the final decision on water prices ‘should now reflect that we are in an entirely new economy, with no growth to help pay the high bills’ and high inflation in business costs’.

She said: ‘With inflation driven by rising electricity and gas prices, we have to keep a close eye on offwater’s regulated settlements with water companies and the prices they charge.

“With the CPI reaching 10 per cent or even, as some forecasters have suggested, 20 per cent – ​​this simply cannot be added to the bills.

‘We need utility companies to support as many small businesses as possible, more than ever before.’